Source: davit kirakosyan
UBS Optimistic on NVIDIA’s Strong Data Center Revenue
UBS, the Swiss multinational investment bank, has recently raised its price target on NVIDIA Corp. (NASDAQ:NVDA) from $175 to $205. This increase in the price target indicates UBS’s bullish stance on the tech company, driven by expectations for strong data center revenue growth. The adjustment comes ahead of NVIDIA’s second-quarter results announcement, scheduled for August 27.
Increased Fiscal Q2 Revenue Forecast
In its analysis, UBS estimated NVIDIA’s fiscal Q2 revenue to be around $46 billion. This figure represents a significant $1 billion increase from the previous quarter. The new projection reflects the bank’s confidence in the computer hardware company’s robust performance and potential growth in the coming quarter.
Potential Impact of Excluding or Including China
On the other hand, UBS forecasts NVIDIA’s fiscal Q3 revenue to range between $54 billion and $55 billion excluding China. However, if China is factored into the calculation, the revenue could surge as high as $57 billion. The inclusion or exclusion of China from the revenue projection is a critical factor considering the size of the Chinese market and its potential impact on the company’s revenue.
Growth in Compute and Networking Revenue
UBS mentioned that its supply chain checks hinted at an expected 20% to 25% quarter-over-quarter growth in compute revenue from a $35 billion base in fiscal Q2. This increase could potentially add an extra $7 billion to $8 billion in compute revenue for fiscal Q3. The bank also predicts networking revenue to be around $6 billion, despite the existing supply constraints. This forecast implies total data center revenue nearing $49 billion.
Challenges in Gaming Sector and Export Limits
However, the brokerage firm also cautioned about potential challenges in the gaming sector. It argued that comparisons with gaming may become more complex after a strong fiscal Q1. This could potentially create a hurdle for NVIDIA, which has a significant presence in the gaming industry.
UBS also highlighted the possible reuse of written-down H20 inventory in China. It suggested that NVIDIA has placed new orders for Hopper wafers and is continually working on a Blackwell version. This development comes amid expectations that the U.S. government may increase export limits as part of negotiations over rare earth elements. These factors could have significant implications for NVIDIA’s operations and future profitability.
Conclusion
In conclusion, while UBS maintains a Buy rating on NVIDIA, it also points out the potential challenges the company might face in the gaming sector and export limits. Nonetheless, the high price target indicates the investment bank’s confidence in NVIDIA’s ability to thrive and generate strong data center revenues. The projections also underscore the critical role that China plays in NVIDIA’s revenue and the potential impact of any changes in trade relations. The tech company’s investors and stakeholders will eagerly await the second-quarter results on August 27 to see if the company meets these high expectations.